Update 2: The stock has resumed trading, and is bounce back and forth between being a penny above the offer price and a penny or two below, indicating some uncertainty over whether there will be a competing bid.

Update 3: Earlier today, the stock had gotten a curious mix of two downgrades today and two upgrades.

On the positive side, R.W. Baird‘s William Power this morning raised his rating on the shares to Neutral from Underperform, writing, “How much worse can it get,” while cutting his price target to $8 from $9.

Power opined the stock was “more likely to be driven by M&A rumors and sum-of-the-parts arguments,” and he offered his own, valuing the stock based on “$4 per share in current net cash and an assumed $4 for IP value, with no value ascribed to the other assets, though we acknowledge there is a case to be made for some value for the services cash flow and enterprise assets, which if unlocked, could provide some upside from here.”

And Credit Suisse‘s Kulbinder Garcha had also raised his rating to Neutral from Underperform, and had also cut his price target to $8 from $9, writing that “The lack of traction for the BB10 platform continues to fall short of expectations and we continue to see a weakening fundamental outlook for the company.”

“However, given the ongoing strategic review we cannot rule out a takeout and based on our analysis we see a NAV of around $7/share in a shutdown scenario.”

On the down side, RBC Capital‘s Mark Sue cut his rating to Underperform from Sector Perform, and cut his price target to $5 from $15, writing that “It’s a race against time for BlackBerry and preserving cash may be of utmost importance as the pace of business deterioration accelerates.”

Jefferies & Co.’s Peter Misek had cut his rating to Hold from Buy, and cut his price target to $8 from $15, writing that his own surveys in the last three weeks showed the company making progress selling enterprises on its “mobile device management” software offering, but that the handset business was going to make it hard to LBO the company:

A month ago we cut our estimates far below St (“Build Plans Cut Again”), but Aug Q revs missed by $1.4B vs. our est of a $700M miss. Sell-in of 3.7M still missed our 5M est. Handset ASP of ~$205 (Jef $308, May Q $318). Sell-through of 5.9M (Jef 7M). Service revs ~$800M vs. our ~$700M est. We believe BB10 builds have been cut once again from ~1M/month to ~100K/month and think additional inventory write-downs are possible. We cut our FY15 handset rev est from $7B to $4B and handset GM from 27% to 5%. Limited upside from potential LBO/acquisition. We think a bid for the whole company is increasingly unlikely as most of the value is in services/MDM. We think the OS, BBM, and patents have some value while the handset business is now an albatross. We believe potential buyers will be price sensitive due to the sub-scale handset business and uncertainty around how much that diminishes the value of the services/MDM business as half the BBRY MDM share is tied to BBRY handsets in some way.

James Faucette of Pacific Crest, who has been one of the more vocal skeptics this year about a turnaround for the handset business, today reiterated an Underperform rating on the shares, writing that the inventory write-down, nearly $1 billion in the quarter, was no surprise to him, and that cash burn would become worse for the company going forward:

For nearly six months, we have been talking about production levels, particularly for the BlackBerry Z10, being well in excess of sell-through. Friday’s preannouncement was the first direct evidence of this, as the company indicated it would be writing down $930 million to $960 million (pre-tax) in inventory and supply commitments, which was primarily attributable to BlackBerry Z10 devices. Probably more important for the company in the near term than device sales will be the cash outlay associated with restructuring charges from the announced layoffs (the company announced it would be letting 4,500 employees go, which is expected to reduce opex by 50% from current levels by F1Q15, or the May quarter in 2014). While BlackBerry burned $500 million in cash in the August quarter (exited with $2.6 billion, roughly $5 per share), we believe cash burn could accelerate meaningfully in the November and February quarters on continued poor operating results, severance packages and payment for produced handsets such that the company could have difficulty maintaining adequate production levels to continue shipping hardware, etc.

Brian Blair of Wedge Partners, who has been followed the company since 1999, wrote this morning that Friday’s announcement represented the final nail going into the coffin, as he put it. And he offered his own personal reflection on following the company since 1999:

We have been following Blackberry since 1999, when the first CDPD network, keyboard-based Blackberry devices were rolling out to Wall Street firms. The two lines of monochrome text and the physical keyboard that enabled email on-the-go represented a true breakthrough and a company that would change the face of communication. I’ll never forget walking in mid-town Manhattan in late 1999 one night and sending an email to Japan, and receiving a reply back by the time I got to the end of the block. It was a wow moment for me as a young tech analyst, and marked the beginning of an era in mobile. In the end though, and this is the end, Blackberry never did anything well beyond email, and I believe that is why this story is ending.

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There are 10 comments

SEPTEMBER 23, 2013 2:06 P.M.

Echo Tango wrote:

where did E.T. go? I miss him. I'm sure he'd have good advice in this tumultuous situation...

SEPTEMBER 23, 2013 2:06 P.M.

Tom wrote:

Saw Microsoft Surface 2 demo. Redmond does not get it. It does not look like a tablet. It is thin notebook.

SEPTEMBER 23, 2013 2:24 P.M.

JC wrote:

Note that Peter Masek had a buy on BBRY with a price target of $15. That says everything about the analytical ability of this analyst.

SEPTEMBER 23, 2013 2:45 P.M.

Anonymous wrote:

$9 !!?!?!?! what a crap deal. so, let me see.... they pre-announce Friday to help trigger a slide towards $8, so suddenly this deal looks good???!?! If thats not goddamn manipulation I don't know what is.

Hey, SEC -- please check this one out.

SEPTEMBER 23, 2013 2:45 P.M.

Mike wrote:

how to acquire a company on the cheap.

Step One. Have the board issue guidance prior to the official date, that confirms way lower revenue expectation, and a huge write down to come... driving share price down further.

Step Two. Get board to announce layoffs of 40% of staff to further shake consumer confidence.

Step Three. Totally screw up launch of cross-platform BBM service that has been one positive in the BB brand...again driving price down further.

Now offer investors a price per share of pretty much what the asset/patent value is.

Success!

Congrats Prem

SEPTEMBER 23, 2013 3:25 P.M.

Freddy wrote:

Did not see this coming!!!

SEPTEMBER 23, 2013 3:33 P.M.

ValleyOracle wrote:

Great for Black Berry as a product and the company (employees). Now it will be run by people who have someone "real" to answer to (when you are a public company, the executives have thousands of masters - the share holders, but no one master with power to demand accountability in a timely manner)
It may never reclaim it's might; but, it will at least run as a profitable company...

SEPTEMBER 23, 2013 4:12 P.M.

Anonymous wrote:

Let the bidding begin: Apple, Microsoft, Google, Samsung.
Hope it ends in the hands of Apple.

SEPTEMBER 23, 2013 4:34 P.M.

Sam wrote:

"while cutting his price target to $8 from $9..."
"and had also cut his price target to $8 from $9..."
"and cut his price target to $5 from $15..."
"cut his price target to $8 from $15...."

LOL @ these analysts. Always good for a laugh.

SEPTEMBER 23, 2013 4:43 P.M.

@ValleyOracle wrote:

I doubt it. Most likely outcome is that once taken private it will be sold for parts.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.